Apparently wanting to have a bigger say in how they run their business, the number of new advisors filing with the Securities and Exchange Commission as registered investment advisors (RIAs) showed no signs of slowing down, according to new industry research.
Based on an analysis of SEC ADV filings, the report by Schwab Advisor Services reveals that new registrations jumped 20% year-over-year and grew by nearly 60% over the last five years, from 150 new RIA firms in 2013 to 238 new firms in 2017.
Firms established in 2017 represented nearly $84 billion in assets under management (AUM) at the time of their registration.
“A decade after the onset of the financial crisis, it’s evident that the independent model has flourished along with investors’ demand for fiduciary advice,” notes Jonathan Beatty, senior vice president of sales and relationship management for Schwab Advisor Services.
Large firms, meanwhile, continue to move to independence at a considerable rate. The number of firms with more than $300 million in AUM embodies nearly 30% of SEC registrations in 2017, up from 12% in 2013, according to Schwab’s data. Broken down further, 5% of the deals for 2017 were for $1 billion or more, 8% were between $500 million and $1 billion, and 15% between $300 and $500 million.
In addition, average assets for new SEC registered firms increased 28% year-over-year to $352 million, as large firms move to independence, the firm notes.
Other aspects of the data show that most firms are selecting a single custodian, but the numbers do not appear to have fluctuated too much over the past five years. Schwab’s report further shows that 64% of the newly registered firms in 2017 were for single custodian, compared to 55% in 2013. The average AUM size for registrations involving a single custodian were $207 million, while the average size was $661 million for multi-custodian.